Friday, July 11, 2008
Airline CEO Takes Full Responsibility for Poor Judgment...Kidding!
Help Fight America's Oil Crisis
That’s the headline of an email we recently received from the folks at Northwest Airlines.
In fact, it was signed by the CEO of Northwest, Douglas Steenland, so we knew it must be important.
Steenland has been CEO of Northwest since October 2004. Keep that date in mind as you read what he is telling his customers how to “fight” the oil crisis:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now. Visit www.StopOilSpeculationNow.com.
He's not writing about conservation, about how to make our travel plans more efficient, about how we can help Northwest reduce oil demand.
He's writing about so-called speculators.
Steenland elaborates with remarkably little in the way of actual advice for reducing demand and increasing supply, and much in the way of mindless angst directed at so-called “market speculation”:
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.
Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Remember what I said about Mr. Steenland being named CEO of Northwest in October, 2004? Northwest Airlines did not start hedging its jet fuel needs until 2008.
Unlike, say, Southwest, which hedged most of its jet fuel needs when prices were low, Northwest didn’t bother until oil had spiked to $100 a barrel.
Now, to be fair, Northwest couldn’t hedge without a bankruptcy court approval back when it was in bankruptcy. But that was more than 50% ago, in oil price terms.
Of course, when a big corporate CEO like Mr. Steenland makes a gross error of judgment like not hedging his single biggest cost of doing business, he naturally takes full responsibility and ask shareholders and customers for forgiveness.
He blames speculators instead:
The nation needs to pull together to reform the oil markets and solve this growing problem. We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.
Northwest emerged from Chapter 11 in May 2007. Northwest equity holders got nothing. Mr. Steenland got a package worth $26.6 million at the time.
Too bad Northwest didn’t use some of that $26.6 million to hedge itself.
I guess the only thing to do now that it's too late to do anything useful is...blame speculators.
Yep, that's the ticket...for an airline that doesn't know much about hedging, anyway.
I Am Not Making This Up
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Posted by Jeff Matthews at 8:11 AM